2022 (3) TMI 1077 - AT - Income Tax

Penalty imposed u/s. 271AAB(1)(a) - search and seizure action u/s. 132(1) - commission amount was not recorded in the books of account of the assessee on the date of search, the said amount is an undisclosed income - HELD THAT - As in the absence of any discovery/seizure of any material during search which un-raveled the purported undisclosed commission income and since the assessee as per law need not maintain books of account and since the assessee had time (more than 40 days till 31.03.2013) the said offer of assessee cannot be termed as undisclosed income as per the definition discussed supra. So, we find that this commission income which the assessee offered u/s. 132(4) of the Act for AY 2013-14 does not fall in the ken of undisclosed income for the purpose of levy of penalty under section 271AAB. So since the assessee s disclosure does not fall in the definition of undisclosed income in sub clause (i) to clause (c) of section 271AAB of the Act, the penalty u/s. 271AAB of the Act cannot be legally sustained in the facts of this case as rightly held by the Ld.CIT(A) by relying on the decision of this Tribunal in M/s. Rashmi Metaliks. - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty imposed under section 271AAB of the Income-tax Act, 1961 for AY 2013-14
- Validity of penalty deletion by Ld. CIT(A) based on a Tribunal decision
- Whether undisclosed income criteria met for penalty under section 271AAB
- Interpretation of definition of 'undisclosed income' under section 271AAB

Analysis:
1. The appeal was filed against the penalty imposed under section 271AAB of the Income-tax Act, 1961 for AY 2013-14. The main issue raised by the revenue was the deletion of the penalty by the Ld. CIT(A) based on a Tribunal decision in a similar case.

2. The revenue contended that the penalty deletion was erroneous as the undisclosed commission income was not recorded in the books of account, making it qualify as 'undisclosed income' under section 271AAB. The Ld. CIT(A) was urged to reverse the decision and restore the penalty.

3. The assessee's defense highlighted that the search took place in the relevant assessment year, giving ample time for the income disclosure. The individual assessee, not required to maintain books of account, voluntarily offered the commission income during the search. The Ld. CIT(A) rightly deleted the penalty based on the Tribunal decision.

4. The Tribunal analyzed the definition of 'undisclosed income' under section 271AAB, emphasizing the requirement for discovery during search of income not recorded in books of account. In this case, no material was found during the search other than the assessee's admission of the commission income. Since the income was disclosed within the time frame and no incriminating material was discovered, it did not qualify as 'undisclosed income' for penalty purposes.

5. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the commission income did not meet the criteria for undisclosed income under section 271AAB. The decision was supported by the fact that the assessee had the opportunity to disclose the income within the prescribed timeline, and no evidence of undisclosed income was found during the search.

6. Ultimately, the Tribunal dismissed the revenue's appeal, affirming the Ld. CIT(A)'s decision to delete the penalty under section 271AAB. The judgment was based on the interpretation of the definition of 'undisclosed income' and the specific circumstances of the case, aligning with the principles established in a previous Tribunal decision.